The Telegraph
Since 1st March, 1999
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Telecom firms fight over spectrum cost

New Delhi, Oct. 25: A raging debate has broken out among telecom operators over a proposal to force them to pay spectrum licence fee — a tab that is placed at over Rs 19,000 crore — with cellular and basic operators urging the government to levy the charge on the other but not them.

At present, the government allocates spectrum free of cost to telecom operators and only charges them for actual usage. A land metaphor has been used to describe the difference between the two charges: the telecom operators do not pay the ground rent for the allocation of the land, but only a tenancy charge for the building built on it.

The government has yet to spell out whether it intends to charge a licence fee for the allocation of spectrum to private telecom operators over and above the nominal spectrum usage charge that is levied as part of their licence fee.

The cellular mobile operators have written a letter to the Vinod Vaish, secretary in the department of telecommunications (DoT), pointing out that the National Telecom Policy 1999 stipulates that fixed-line service providers (read basic operators offering wireless telephony) would have to pay "an additional one-time fee over and above the FSP entry fee". The policy, they contend, does not make cellular operators liable to pay the charge.

The letter, which has been written by T.V. Ramachandran, director general of the Cellular Operators Association of India (COAI), says, “"They (the FSPs) also have to pay an additional revenue share licence fee percentage on an ongoing basis. These stipulations are rational and understandable since spectrum is not a mandatory requirement for the provision of fixed service. It is only an additional, optional facility for last mile connectivity for quicker rollout and difficult terrain. Hence, the need for separate payment for the optional facility."

Cellular operators contend that unlike other countries, India allots very little spectrum to telecom operator. A typical telecom operator is allocated about 6 Mhz of spectrum against the international average of 17 Mhz. This leads to deficiencies in the quality of service as well as higher cost of service.

They also contend that the cellular operators have paid a one-time entry fee for the licence. "There is no separate one-time entry fee mentioned for spectrum (allocated to) …cellular operators. If enough spectrum is not provided, then subscribers would have to be turned away when the limit is reached with available spectrum," says the COAI letter.

“World over, the practice is that if the cellular mobile licence is auctioned then spectrum is packaged with it. Alternatively, if spectrum is separately auctioned, then the cellular mobile licence will be issued for a nominal registration cost,” says the COAI letter.

“In India, we are obviously following the route of auctioning the cellular mobile licence, and, spectrum is, therefore, packaged with it and a revenue share spectrum usage charge is applied for the latter on an ongoing basis,” says the letter.

A senior official in the communications ministry said their claim is only true to the extent of the allocated packaged spectrum, which is only 4.4 Mhz in case of licences issued under the NTP 94.

However, in the case of fourth cellular licences issued under the NTP 99, "it is very clearly stated that a cumulative maximum of 4.4 + 4.4 Mhz will be permitted and, based on usage, justification and availability, additional spectrum up to 1.8 Mhz + 1.8 Mhz making a total of 6.2Mhz + 6.2 Mhz, may be considered for assignment, on a case-by-case basis on payment of additional licence fee."

Communications minister Arun Shourie has said on various occasions that spectrum is a scarce resource.

Cellular operators said in their letter that, " The government has been making available additional spectrum after coordinating with other agencies. The government orders in this regard (ref letter no. L-14041/06/2000-NTG dated 01/02/2002…) makes it eminently clear that while there is additional revenue share spectrum charges payable for additional spectrum, there is no mention whatsoever of any sort of additional entry fee. "

Meanwhile, the basic operators have rejected the cellular operators’ contention that they should cough up the spectrum licence fee. They argued that all operators – irrespective of whether they are basic or cellular operators – should pay for the additional spectrum allotted to them, provided the government first makes up its mind whether or not to levy the cost.

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